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From left: Chris Arsenault, the founding partner of the venture capital firm iNovia, Dennis Kavelman, former CFO of Blackberry, and Patrick Pichette, former CFO of Google, at the Inovia Capital offices in Montreal on April 9, 2018.Dario Ayala/The Globe and Mail

One of Canada’s largest venture capital firms, Inovia Capital, has raised its second fund to invest in emerging Canadian technology giants.

Inovia, a backer of some of the top Canadian digital companies of recent years, said Tuesday it had secured US$450-million for its second “growth” equity fund. Its backers include the Caisse de dépôt et placement du Québec, the investing arms of the Alberta and Quebec governments, Kensington Capital Partners, Northleaf Capital, Fonds de solidarité FTQ and BMO Capital Markets. Ten Inovia-backed CEOs also invested.

Inovia raised US$400-million two years ago for its first growth fund targeted at companies that generate tens of millions of dollars in annual revenues and are still growing rapidly. The fund is co-managed by Inovia co-founder Chris Arsenault and the ex-chief financial officers of Google and BlackBerry , Patrick Pichette and Dennis Kavelman, respectively, who are both Canadian. Inovia is one of only a handful of Canadian funds backing growth-stage firms, along with Georgian Partners and OMERS, competing against foreign financiers.

The fund arrives a year ahead of the firm’s original plan after Inovia backed 10 companies with its first growth fund and decided to hold back some cash to help them finance acquisitions. “We saw a great number of terrific companies for Fund I and we don’t think it’s slowing down,” Mr. Kavelman said.

Its first fund backed such high-profile Canadian tech firms as Lightspeed POS Inc. , Hopper Inc. and Symend Inc. and has generated a net internal rate of return in excess of 30 per cent. Inovia’s track record and Canada-first approach also helped the firm win key roles on big financings by two emerging U.S. tech giants founded by Canadians: AppDirect Inc. and Sonder Holdings Inc.

Inovia raised 90 per cent of the new fund from Canadian investors, an intentional move on the firm’s part, Mr. Arsenault said. “Canadians need to see patterns of recognition and success in order to be more involved in the category ... we’re seeing a lot of investors looking at the Canadian market being an opportunity to invest and build companies.”

Inovia started out funding early-stage ventures and had several successful exits, including the sale of online apartment rental service Luxury Retreats to Airbnb for $400-million in 2017. As Inovia-backed Canadian companies got bigger, most of the follow-on capital they raised came from outside Canada.

Meanwhile, the Inovia team got comfortable leading larger rounds. The firm also helped lead a 2017 buyout with the Caisse of Accel Partners’ stake in Lightspeed, rather than see the U.S. venture capital firm force a sale of the Montreal point-of-sale software provider.

That was a transformative deal for the Canadian tech sector: Instead of succumbing to a foreign takeover, Lightspeed went public in 2019 and has since achieved a valuation of more than $11-billion. Inovia “understood our business and saw the potential for global growth,” said Lightspeed CEO Dax Dasilva. “As our first Canadian investor they were supportive partners at every step, and their support also brought significant Canadian investors to the table.”

“We invested [in the new Inovia fund] because Chris, Patrick and Dennis have been great partners – not just with BMO but also with the portfolio companies they invest in,” said David Wismer, managing director and global head of technology investment and corporate banking with BMO, which led Lightspeed’s IPO. “We share a vision for helping companies scale globally, and in particular, helping to build the Canadian technology ecosystem.”

Inovia’s commitment to Canada has also helped win over patriotic Canadian founders, along with its reputation as a “founder-friendly” investor, said Adrian Schauer CEO of Alaya Care Inc., which raised tens of millions of dollars in two separate financings backed by Inovia in the past two years to build its business selling software to homecare providers. “We chose Inovia for a bunch of reasons,” he said. “For me the Canadian roots are a bit better than a tie-breaker.

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